First mile, last mile? Forget it. The next big value opportunities now, as the current generation of bio-technologies head for scale, may be on the nanoscale.

Upstream, midstream, downstream. Terminology from the world of oil & gas, but useful for bioenergy too.

We broadly understand upstream to mean the world of feedstocks, midstream as the realm of processing technologies, and downstream to mean the system by which we distribute refined molecules to the marketplace, including pipelines, terminals, the logistics of rail, barge or truck, retail pumps and stores, or even engine technologies.

Now, it sounds well-organized enough that all the value-add opportunities ought have been elegantly exposed via the invisible hand of the market.

Which is more lucrative? Downstream is tough. There’s ample evidence that, in the rampant demand for “drop-in fuels”, the big dollars in technology development are not going to lie in new paths to providing the last mile of distribution to the customer – in fact, even those new pathways that have been discussed to date – such as ethanol pipelines or blender pumps, are broadly understood to require government grants and/or loan guarantees, outside of the established ethanol markets of Brazil.

The midstream world, where magic microbes upgrade and refine the molecules found in feedstocks into higher-value fuels and chemicals. Well, that’s been the focus of most investment, discovery and invention to date. Most of the 50 Hottest Companies in Bioenergy are midstream companies – whether it is Solazyme’s magic algae, the magic yeasts of Amyris or Gevo, or the magic bacteria of LS9 or Joule Unlimited – just to name a few – that’s where most of the IPO activity and the excitement has been, for just on a decade now.

The era of magic microbes

Lately, the magic microbes, or thermocatalytic process, that have been getting traction are those that have been unlocking the lowest cost, previously unusable feedstocks – also, known broadly as “waste” – such as the magic bugs of Coskata, INEOS Bio and LanzaTech unlocking value in industrial off-gases or municipal solid waste, or Enerkem’s or KiOR’s processes for unlocking value in low-cost wood feedstocks or waste, or ZeaChem’s wood-loving acetogen.

Upstream, the number of companies are growing and the activity has become more and more intense. Whether it is miscanthus pursued by Mendel Biotechnologies, jatropha as pursued at SG Biofuels, sorghum as pursued at Chromatin, switchgrass or energy cane as pursued at Ceres, more and more investors and scientists are looking farther upstream than ever before in search of the next big IPO, or the Next Big Thing.

Ceres’ post-IPO performance has encouraged those thoughts. The company, which struggled to get out the door at $13 via an IPO that resembled a breech birth more than a smooth delivery, is one of the two recent bioenergy IPOs (the other is Renewable Energy group) that is trading above its IPO price, with Ceres currently up 23 percent at $15.99. Of course, we’ll see how that price holds up when the lock-up period for insiders expires – Gevo, Solazyme and Amyris traded well over their IPO prices in the first 90 days as well.

Now, feedstocks – and the crop technologies behind them, have their own upstream, midstream and downstream. There’s money, for example, in the logistics of figuring out the best way to bring feedstock to market – will there be, for example, a hub-and-spoke system where biomass is processed into liquid renewable sugar streams, and piped down to massive refineries near the coasts, where they can be processed at scale?

Longtime Burrill VC John Hamer is skeptical about that model. “Transport sugars through pipelines? They would have to be completely sterile environments. You might know what you are putting into the pipeline, but give bacteria enough sugar and time, and who knowns what they’ll convert the sugars into by the time they reach their destination. Unless you develop some really good filtration technologies.”

So, where might the big value hunters be hunting next?

Looking farther upstream

Think micron and the last micron.

The last micron? Well, after the refining, or even the transport, and there’s the trade. The global system for trading and transporting biomass and biofuels is in its infancy. A trade may only represents a shift in a couple of data fields only microns apart, Though oil, sugar, corn and soybeans are traded swiftly and efficiently as global commodities, the same cannot be said for woodcuts, jatropha oil, or even MSW. Once value is unlocked, and unlocked globally, trading develops, and the systems of trade represent both the last mile and one of the great value-creation frontiers of the emerging industrial biotech world.

But even more, think first micron. One thing we have learned about the rise of biotechnology is that farmers have been doing pretty well with corn, sugar and soybeans. Yields have risen, prices are strong – even when the “crush spread”, the margins in refining feedstocks into renewable fuels, look terrible, the basic bioenergy commodities have kept on doing well.

Companies such as Monsanto, Syngenta, Bayer, and Dow have been doing very well in crop development, even if they are hesitant in developing technologies that deliver value beyond the fence-line of the farm, preferring to focus on yield, herbicides, and pathogens than making bold moves to develop value farther downmarket in the bioenergy value stream. There’s been investment in bioenergy, but it’s been hesitant so far.

That first micron

But think about that first micron. For the bio-based world, think of the threshold where photon meets leaf. How many hot-shot research teams have been crushed by the intertwined complexities of revamping the process of photosynthesis? Hard to say, but it’s a big number.

Now – a run-down of the inefficiencies – and, thereby, the opportunities – in plant-based systems as they grab their photons, carbon, hydrogen and oxygen – well, it’s material for an entire book. Perhaps 20.

The factory-to-be inside the plant

Suffice it here to say that the plant species we know and work with today are laid-back boutiques in a world that must ultimately develop industrial efficiency right down into the Calvin cycle by which they fix and use carbon.

Plants, in short, have not yet met their Henry Ford.

If photosynthetic efficiency is around 1-4 percent (that is, 4 percent of the energy received by plants is converted into the stored energy of plant-based molecules), then doubling or trebling that rate represents a massive amount of value creation for the sector, unlocking all sorts of value-opportunities downstream of the leaf.

Tough science? Heck yes. Rewarding? Could there be anything more valuable than processes that simultaneously, and defensibly, transform energy, food and pharma, all at the same time, and all on a global scale.

It’s a high-value micron, all right. Think of it as a one small step for the molecule, one giant leap for mankind.